Economics Detective Radio

Today's guest is David Friedman of Santa Clara University. Our discussion centers around his upcoming book, Legal Systems Very Different From Ours, which you can read in draft form at his website. David became interested in this topic when he became interested in the decentralized legal system of saga-period Iceland. This interest has since expanded into a full book covering everything from Imperial Chinese Law to the customary legal system of Somaliland in northern Somalia. We discuss some of these chapters, with a focus on Somalian, Jewish, Icelandic, and 18th-century British law. We also discuss some of the major themes of the book, such as feud law and embedded or polylegal systems. Related links: I. M. Lewis' book on the modern history of Somalia The Invisible Hook by Peter Leeson (He contributed a chapter on pirate law to Legal Systems Very Different From Ours). He was also a recent guest of this show.

My guest today is Frank Milne of Queen's University. Our topic for today will be unintended consequences. Frank has written a paper directed at policymakers to help them understand some of the pitfalls that economists have identified. The paper is directed at Australian policymakers, so some of the examples are Australia specific, though they generalize quite well to other countries. We start where the paper starts, with a discussion of Australia's heavy investment in commodity exports to China in the wake of the 2008 crisis. Many people mistook the temporary increase in demand for Australian mineral exports for a permanent change, leading them to over-invest in developing the Australian mining industry. We go on to discuss many topics, with a particular focus on housing. We also touch on Frank's work on Systemically Important Real Sectors (SIRS), which he is working on with co-author John F. Crean. SIRS are sectors with the potential to cause systemic problems in the banking sector. They feature high volatil

Today's guest is Clifford Winston of the Brookings Institution. We discuss infrastructure, particularly roads and airports, and the incentives faced by their users. Bad incentives create congestion problems that can't be solved by simply throwing more money into infrastructure; you need to fix the incentives! Clifford's work on privatization shows how it could improve incentives and reduce the costs of congestion. Clifford argues that self-driving cars will fix some of the problems created by bad policy. We also discuss the letter grades issued for infrastructure by the American Society of Civil Engineers and what they do and don't tell us about the quality of American infrastructure.  

Peter Leeson of George Mason University joins the podcast today to discuss his latest book, WTF?!: An Economic Tour of the Weird. We discuss the economic reasoning behind some of history's strangest practices: ordeals that were used to determine innocence or guilt in medieval Europe, trials by battle that were used to settle land disputes in Norman England, wife auctions that happened during the Industrial Revolution, and the criminal prosecution of insects and rodents by ecclesiastical courts in Renaissance Italy. Also check out Peter's previous book, The Invisible Hook, about the economics of pirates. You won't regret it!  

My guest today is Jared Rubin of Chapman University. He is the author of Rulers, Religion, and Riches: Why the West Got Rich and the Middle East Did Not, which is our topic for today. The book deals with the question of why Western Europe became wealthier than the Middle East after centuries of being poorer. The book is part game theoretic model of society, part historical narrative through the lens of that model. The model considers two main factors: the state's power to coerce and its need for political legitimacy granted by elites. Importantly, different groups have been the ones to grant legitimacy to the state in different times and places. In the Muslim world, religious leaders primarily played this role, as they did in Europe prior to the Reformation. After the Reformation, however, the power of the Catholic Church was much diminished in many parts of Europe. Rulers in places like England and the Dutch Republic turned to economic elites to grant them legitimacy. This gave the merchant and capitalist c

My guest today is Kevin Leyton-Brown, he is a Professor of Computer Science at the University of British Columbia. Kevin's work involves not only computer science topics such as artificial intelligence, but also game theory, and the intersection between the two. Our topic for today is an app that Kevin co-founded called Kudu, which uses double auctions to help Ugandan farmers trade more effectively. Kevin was interested in using his skills to help people in the developing world, so during a sabbatical seven years ago, he resolved to go to a country in sub-Saharan Africa to do just that. He settled on Uganda and, after living there for a time, noticed something peculiar about the market for agricultural goods there. In the city, you would sometimes find vendors selling goods at very high prices, and even running out. Meanwhile, in the countryside, vendors would have so much stock they would be selling at extremely low prices, even rotting before they could be sold. Kevin, along with his partners John Quinn and

Returning to the podcast is David Henderson of Stanford University's Hoover Institution and the Naval Postgraduate School in Monterey California. Our topic for today is the German Economic Miracle. David wrote an article on it for the Concise Encyclopedia of Economics. The article begins as follows: "After World War II the German economy lay in shambles. The war, along with Hitler’s scorched-earth policy, had destroyed 20 percent of all housing. Food production per capita in 1947 was only 51 percent of its level in 1938, and the official food ration set by the occupying powers varied between 1,040 and 1,550 calories per day. Industrial output in 1947 was only one-third its 1938 level. Moreover, a large percentage of Germany’s working-age men were dead. At the time, observers thought that West Germany would have to be the biggest client of the U.S. welfare state; yet, twenty years later its economy was envied by most of the world. And less than ten years after the war people already were talking about the Germ

My guest today is Jamie Pavlik of Texas Tech University. Jamie has done a ton of research on corruption and development. She has examined corruption in the developing world, with multiple papers examining corruption in Brazil. She has also looked at international comparisons of corruption, and corruption in the United States specifically. We discuss her work on corruption as well as some of the statistical issues with spatial econometrics.  

My guest today is Thomas Sampson of the London School of Economics. Our topic for today is the economic impact of Brexit. Long-time listeners will recall that I did an interview with Sam Bowman on Brexit immediately after the vote occurred. Think of this as a follow-up to that episode now that the dust has settled and we have a better idea of what Brexit is going to look like. Thomas has written multiple papers on the subject, including Brexit: The Economics of International Disintegration, which is forthcoming in the Journal of Economic Perspectives. Its abstract follows: This paper reviews the literature on the likely economic consequences of Brexit and considers the lessons of the Brexit vote for the future of European and global integration. Brexit will make the United Kingdom poorer because it will lead to new barriers to trade and migration between the United Kingdom and the European Union. Plausible estimates put the costs to the United Kingdom at between 1 and 10 percent of income per capita. Other Eu

My guest today is Karl Smith, he is the director of economic research at the Niskanen center. Our topic for today will be market power. Karl has written a series of posts on the Niskanen center blog discussing markups and market power. The debate was sparked by a paper by Loecker and Eeckhout that claimed that average markups in the American economy had risen from 18 percent in 1980 to 67 percent today. There are many different interpretations one might have for this data. What Karl points out is that these markups have mainly risen among smaller firms. Wal-Mart has very low markups, but niche specialty firms such as the local vegan café have relatively high markups. This makes sense in the context of monopolistic competition, where consumers pay a small premium in return for greater product differentiation. Noah Smith had this response to Karl's article: "Robin Hanson and Karl Smith both have posts responding to De Loecker and Eeckhout’s paper and attacking the Market Power Story. Both give reasons why they

My guest today is Fabio Rojas. He is professor of sociology at Indiana University Bloomington. Fabio is the author of three books, the first is From Black Power to Black Studies: How a Radical Social Movement Became an Academic Discipline, published in 2007. The second book, coauthored with Michael Heaney, is Party in the Street: The Antiwar Movement and the Democratic Party after 9/11, published in 2015. The third book, Theory for the Working Sociologist, was published just recently in 2017. We begin the conversation by talking about the discipline of sociology in general. What should an undergraduate student know about sociology, and furthermore, what should other social scientists know about the field? We discuss the distinct methods that make sociology sociology. Moving on, we discuss the relationship between activism and scholarship, particularly as it pertains to sociology but also as it pertains to black studies, the subject of Fabio's first book. Related Links: The Theory of Moral Sentiments James H

My guest is Peter Jaworski of Georgetown University's McDonough School of Business. He is the author, along with Jason Brennan, of Markets Without Limits. We recorded this on August 24th, 2017, the same day Peter published an op-ed in the National Post titled "Canada needs blood plasma. We should pay donors to get it." The op-ed argues in favour of allowing people who donate blood plasma in Canada to be compensated in return: Canada buys the overwhelming majority of its plasma-protein products from American, for-profit companies that attract plasma donors by paying them. In 2016, Canadian Blood Services collected only 17 per cent of the total plasma it needs for essential plasma-products. To cover the shortfall, Canadian taxpayers spent $623 million buying just one of these products, immune globulin. That’s why Canadian Blood Services (CBS) recently asked the government for $855 million in additional funding over the next seven years. They want to use the funds to open plasma collection centres that could c

Samuel Hammond is returning to the podcast today to discuss the relationship between capitalism and social justice. Sam was prompted to write about this by an insensitive Pepsi commercial that caused some controversy in April 2017. The controversial ad featured generic protesters and Kendall Jenner sharing a Pepsi with police. While the ad was insensitive and more than a little absurd, Sam pointed out that Pepsi has a history of promoting social justice and racial harmony through its marketing. Back in 1940, Pepsi was a small player compared to Coca-Cola; the latter selling 25 sodas for each one Pepsi sold. In order to compete, Pepsi's CEO Walter S. Mack Jr. decided to do something the other companies weren't doing: marketing specifically to African Americans: "In 1947, [Mack Jr.] hired Edward F. Boyd, an African-American adman who later became known as one of the fathers of niche-marketing. Boyd crafted ads for Pepsi that celebrated black cultural and professional achievements, and above all portrayed Africa

This episode’s guest is Vincent Geloso, here to talk about his work on Cuban healthcare statistics. He recently released a working paper with coauthor Gilbert Berdine titled "The Paradox of Good Health and Poverty: Assessing Cuban Health Outcomes under Castro." The abstract reads as follows: In spite of being poor and lacking in economic opportunities, the population of Cuba enjoyed significant improvements in health outcomes under the Castro regime. Many have praised the ability of the regime to overcome the barriers of poverty and economic stagnation in order to improve health outcomes. Many have also argued that efficient features of Cuba’s health policy should be imported regardless of political considerations. In this paper, we argue that these improvements are probably overestimated, but that they are real nonetheless. We also argue that some of these improvements were an integral part of health policy and could only have been realized by the use of extremely coercive institutions. While efficient at fi

My guest for this episode is Noel Johnson of George Mason University, and if that name sounds familiar, it's because he was the coauthor on the paper I discussed with Mark Koyama last month. Noel recently released a working paper titled "The Effects of Land Redistribution: Evidence from the French Revolution." It is coauthored with Theresa Finley and Raphael Franck. The paper examines the consequences of the land auctions held by the Revolutionary government in France. The abstract reads as follows: This study exploits the confiscation and auctioning off of Church property that occurred during the French Revolution to assess the role played by transaction costs in delaying the reallocation of property rights in the aftermath of fundamental institutional reform. French districts with a greater proportion of land redistributed during the Revolution experienced higher levels of agricultural productivity in 1841 and 1852 as well as more investment in irrigation and more efficient land use. We trace these increase

My guest for this is Ekaterina Jardim of the University of Washington. Ekaterina is one of the authors of the new minimum wage study that has been making headlines recently, "Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle." One reason this study is so interesting is that it was funded by the City of Seattle, which is something that governments aren’t obligated or expected to do when they enact major policy changes like these minimum wage hikes. There was a broad theoretical and empirical consensus in the 1980s that higher minimum wages have disemployment effects on the low skilled, and then Card and Krueger (1994) started a new empirical literature that found no evidence of disemployment effects. A major problem with Card and Krueger (1994) and with many of the other studies conducted over the past quarter century was their use of proxy measures for low-skilled workers. Instead of looking at workers who actually earned less than the new minimum wage, these studies looked at grou

My guest today is Kevin Erdmann, he blogs about economics and finance at Idiosyncratic Whisk. Kevin has written a ton about housing, as evidenced by the titles of his blog posts. A recent one is labeled Housing: Part 239. This series is part of a larger book project that Kevin is publically drafting on his blog. We discuss the housing bubble of the 2000s and the post-2008 housing market. I took my first undergraduate economics class in 2008, just as the financial crisis was beginning, so there's never been a time in my economics career when people weren't talking about this. And yet, I still have so much to learn! Kevin makes an interesting distinction between "open-access cities" and "closed-access cities." Closed-access cities are places like San Francisco, New York, and San Jose that have restricted their housing supplies. Open-access cities are places like Houston and Phoenix with more elastic housing supplies. We talk about these factors and how they relate to the housing boom and bust, liquidity, and ce

The guest for this episode is Jonathan Morduch, he is a professor of public policy and economics at NYU and the author of The Financial Diaries: How American Families Cope in a World of Uncertainty, co-authored with Rachel Schneider. The book looks at the financial situations of ordinary American families. It is centered around a detailed survey of 235 households where they recorded what they earned and what they spent at an extremely granular level. From a truck mechanic whose income depends on bad weather wearing out the parts on trucks to a blackjack dealer whose tips literally depend on her customers' winnings at the blackjack table, the surveys reveal a huge amount of variance in the incomes and expenses of these households. This variance is not captured in annualized statistics, but it has profound implications for the way these households spend and save. We discuss financial literacy in the context of the real problems people face and relate the stories to some results from behavioural and experimenta

In this episode, I have three guests on the show with me: Kewei Hou of Ohio State University, Chen Xue of the University of Cincinnati, and Lu Zhang of Ohio State University. Kewei, Chen, and Lu have coauthored a paper titled "Replicating Anomalies," a large-scale replication study that re-tests hundreds of so-called "anomalies" in financial markets. An anomaly is a predictable pattern in stock returns, or stated differently, it is a deviation from the efficient markets hypothesis. Their abstract reads as follows: The anomalies literature is infested with widespread p-hacking. We replicate the entire anomalies literature in finance and accounting by compiling a largest-to-date data library that contains 447 anomaly variables. With microcaps alleviated via New York Stock Exchange breakpoints and value-weighted returns, 286 anomalies (64%) including 95 out of 102 liquidity variables (93%) are insignificant at the conventional 5% level. Imposing the cutoff t-value of three raises the number of insignificance to

My guest on this episode is Kevin B. Grier of the University of Oklahoma. Our topic for today is a paper Kevin wrote on the economic consequences of Hugo Chavez along with coauthor Norman Maynard. I had Francisco Toro on the show last year to discuss Venezuela's economic history, so you can listen to that episode if you want a refresher on Chavez. For this episode, our main topic is the empirical method Kevin used to quantify Chavez' effect on Venezuela: synthetic control. Synthetic control is a relatively new empirical technique. It grew out of an older technique called difference in differences (or diff-in-diff). Diff-in-diff is simple and intuitive: Given two statistics with parallel trends, we can compare their changes before and after some intervention affecting only one of them to see the effect of the intervention. So for instance, if you wanted to know the effect of Seattle's minimum wage increase, you could compare the employment trend among low-skilled workers in Seattle to the same trend in Portlan